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STEREOTAXIS, INC. filed this Form S-1/A on 06/17/2004
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       From inception through March 31, 2004, we recorded amortization of deferred stock compensation of $2.6 million. At March 31, 2004, we had a total of $670,968 remaining to be amortized over the vesting period of the stock options. We expect the total unamortized deferred stock compensation recorded for all option grants through March 31, 2004 will be amortized as follows: $305,722 during the remainder of 2004, $283,219 during 2005, $65,625 during 2006 and $16,402 during 2007. As of March 31, 2004, $548,977 of deferred compensation is subject to periodic remeasurement.

       The amount of deferred compensation expense to be recorded in future periods may decrease if unvested options for which we have recorded deferred compensation are subsequently cancelled or expire, or may increase if the fair market value of our stock increases or we make additional grants of non-qualified stock options to members of our scientific advisory board or other non-employees.

Deferred Income Taxes

       We account for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes. Under this method, deferred assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We have established a valuation allowance against the entire amount of our deferred tax assets because we are not able to conclude, due to our history of operating losses, that it is more likely than not that we will be able to realize any portion of the deferred tax assets.

Valuation of Inventory

       We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out (FIFO) method, or its current estimated market value. We periodically review our physical inventory for obsolete items and provide a reserve upon identification of potential obsolete items.

Intangible Assets

       Intangible assets are comprised of purchased technology with a finite life. The acquisition cost of purchased technology is capitalized and amortized over its useful life in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. We review the assigned useful life on an on-going basis for consistency with the period over which cash flows are expected to be generated from the asset and consider the potential for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The process of estimating useful lives and evaluating potential impairment is subjective and requires management to exercise judgment in making assumptions related to future cash flows and discount rates.

Results of Operations

Comparison of the Three Months ended March 31, 2003 and 2004

       Revenues. Revenues increased from $386,000 for the three months ended March 31, 2003 to $3.1 million for the three months ended March 31, 2004, an increase of over 700%. Revenues from sales of systems increased from $365,000 for the three months ended March 31, 2003 to $2.7 million for the three months ended March 31, 2004, an increase of approximately 640%. Revenues from the sale of systems increased because we sold five systems in the first quarter of 2004 compared to one system in the first quarter of 2003. Revenues from sales of disposable interventional devices, service and accessories increased from $21,000 for the three months ended March 31, 2003 to $402,000 for the three months ended March 31, 2004. This increase was attributable to increased sales of our disposable interventional devices as our installed base of systems has grown and to the increased utilization of disposable interventional devices on a per system basis.


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